Kerala lessons for crop insurance

If Kerala had covered more area under PMFBY, the impact on farmers could have been minimised

The floods have devastated vast parts of the state’s agriculture and related sectors, and farmers have lost their crops and animals. (Reuters)

After experiencing the all-round devastation caused by the floods said to be the worst in 100 years, the work of rehabilitation and restoring the livelihood of people in Kerala will be receiving top priority of the government. Even though agriculture contributes just 9% of the state gross domestic product, a majority of rural population of Kerala is still dependent upon agriculture and allied activities. The floods have devastated vast parts of the state’s agriculture and related sectors, and farmers have lost their crops and animals. Only 2% of the gross cropped area in the state is covered under the Pradhan Mantri Fasal Bima Yojana (PMFBY). So, farmers will not benefit from a scheme designed to provide succour in circumstances in which it is most needed.

Since FY93, in Kerala, the area under rice has declined, while that under tapioca, banana, pepper, rubber and coconut has substantially increased. Paddy occupies less than 10% of the net sown area of the state. There are many reasons for this transformation. The shortage of labour and the integration of Kerala’s agriculture economy with the global export market has contributed to this diversification.

The Centre launched the PMFBY from the kharif season of 2016 onwards. The premium to be paid by farmers was fixed at a very low rate of 2% of the sum insured for kharif, and 1.5% for rabi for food grains, pulses and oilseed crops. For annual commercial and horticulture crops, it was kept at 5%.

The difference between the actual premium and the farmers’ premium is paid as premium subsidy, and it is equally shared between the state government and the central government.

Many states have taken initiatives to popularise the scheme and provide insurance cover to a large percentage of farmers. In 2016-17, Chhattisgarh, Rajasthan and Madhya Pradesh covered over 40% of the gross cropped area (GCA) under crop insurance, while Kerala insured just about 2% of the GCA and covered banana, paddy and tapioca under the PMFBY. Under the more popular, weather-based crop insurance scheme, Kerala has covered areca nut, banana, cardamom, ginger, pepper, pineapple and sugar cane. But it seems that the crop insurance scheme was not given adequate publicity and importance by the state government, and the insurance coverage remained very small.

In Kerala, of the GCA of 26.17 lakh hectares, only 17.6% is under irrigation cover—but an average of 2,039-mm of normal rainfall during the southwest monsoon season ensures that farmers get enough water for their crops. In fact, monsoon rains in Kerala bring cheer not only to farmers, but also to tourists, who throng the resorts during this period. In 2016, Kerala received 34% lower-than-normal rainfall during the monsoon months of June to September. In its first year of operation, as many as 23,649 loanee farmers and 7,882 non-loanee farmers insured their crops under the PMFBY, and an area of 21,378 hectares was insured. Kerala collected a gross premium of Rs 8.58 crore, of which farmers paid Rs 3.12 crore as premium. The central and state governments paid a premium subsidy of Rs 4.34 crore each. Due to the damage to their crops, 21,046 insured farmers received a claim of Rs 17.35 crore from the Agriculture Insurance Corporation (AIC), a government of India company.

In 2017, Kerala received 1,856-mm of rainfall, which was minus 9% of normal rainfall. The Wayanad district, in fact, faced a shortfall of minus 37%. During the kharif 2017 season, 25,666 loanee and 2,593 non-loanee farmers insured their crops and paid a premium of Rs 3.76 crore, while the gross premium was Rs 12.45 crore. Against the estimated claims of Rs 9 crore, the insurance companies settled claims of Rs 6.12 crore, benefiting 14,694 farmers. The state government released part of premium subsidy of kharif 2017 only on August 4, 2018, and I understand that the AIC has already paid Rs 7.96 crore as claims arising out of kharif 2017.

The paddy crop in the Kuttanad region—covering Alappuzha, Kottayam and Pathanamthitta—has gotten submerged in water due to the floods and the insured farmers should soon be able to get their insurance claims from the AIC.

From kharif 2017 onwards, the central government had made it compulsory for banks to enter data of insured farmers on the insurance portal. However, the crop insurance portal does not provide any data for kharif 2018. It is, thus, not known how many farmers in Kerala were insured this year. If the state government of Kerala had taken a serious interest in the crop insurance scheme and covered a higher GCA, farmers would have received insurance claims due to the damage caused to crops by the floods this year. The impact of financial devastation on farmers could have been minimised through crop insurance.

It is hoped that other states will learn from the Kerala experience to shield their farmers from natural calamities.